Thomas, Jonathan P. and Worrall, Tim S. (2010) Dynamic relational contracts with credit constraints. Working Paper. Social Science Research Network (SSRN). (Unpublished)

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Abstract

This paper considers a long-term relationship between two agents who undertake costly actions or investments which produce a joint benefit. Agents have an opportunity to expropriate some of the joint benefit for their own use. The question asked is how to structure the investments and division of the surplus over time so as to avoid expropriation. It is shown that investments may be either above or below the efficient level and that actions and the division of the surplus converges to a stationary solution at which either both investment levels are efficient or both are below the efficient level.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Publisher:	Social Science Research Network (SSRN)
Official Date:	31 March 2010
Dates:	Date Event 31 March 2010 ["eprint_fieldopt_dates_date_type_available" not defined]
Status:	Not Peer Reviewed
Publication Status:	Unpublished
Funder:	Economic and Social Research Council (ESRC)
Grant number:	RES-000-23-0865

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